HOW TO SUCCEED IN PROCUREMENT IN 2022

The Covid-19 pandemic, and the ensuing commodity price disruptions and shortages, have forever altered the world of procurement. In 2022, many businesses will continue to grapple with heavily disrupted supply markets and continuity challenges, temporary and permanent shifts in consumption patterns, a new emphasis on cash and risk management, and changing input costs.

Amid this chaos, procurement teams will also play an intrinsic role as companies revisit their policies and programs to address diversity and inclusion. If they haven't already, they will need to push supplier diversity to the top of the procurement agenda this year. They will also need to answer the call for sustainability by emphasizing sustainable sourcing and environmentally responsible supply chains. In this environment, there are few quick hits remaining to rapidly improve the P&L. Instead, most organizations are merely trying to navigate price disruptions and shortages across strategic categories. Procurement leaders' focus is swiftly shifting from cost savings to a more complex set of goals: improving supply chain risk mitigation and resiliency strengthening relationships with strategic supply base partners increasing transparency supporting nearshoring initiatives while aggressively pursuing savings and more.

Traditional playbooks focused on reducing costs through sourcing programs that emphasized "buying better" strategies. That won't be enough in 2022. Leaders will need to broaden their toolkit, finding ways to capture value and strengthen operational resiliency, given the anticipated headwinds. This year's continued supply chain challenges will be coupled with increased demand across all industries. And enduring labour shortages and climbing labour costs throughout the value chain will only compound the issue (see Figure 1). Direct material indices are rising, and suppliers are quick to react. These factors are inflating costs across the boardand procurement departments will have to pay up to ensure they meet customer demand.

Many suppliers are passing these material increases on to their customers. But some suppliers are also using rising prices as a chance to increase prices more broadly. This puts more onus on buyers to understand the magnitude of increases, the reasons behind them, and the measures they can take to claw back some of those increases once inflation abates.

In the next year, a balanced perspective on metricsones that look at operational agility and supply base resiliency, then cost savingswill distinguish the procurement leaders from the laggards. To succeed, procurement teams will need to strategically seize hidden opportunities with suppliers, by using a more sophisticated toolkit and partnerships with stakeholders around the business.

The best procurement teams will change the lens through which they view the elements of their value chain. While suppliers and customers will continue to play their traditional roles, winning teams will also start to see them as strategic partners. For instance, as teams employ value engineering, they will have to develop solutions with customers that meet qualifications and design specs. Concurrently, they will need to collaborate with suppliers to determine if they can implement substitute materials or alternate formulations. Of course, assuming there are opportunities, multidimensional negotiations will be necessary to divide value across these different partners.

QUESTION 1

1.1 With reference to the case study provided and using any relevant examples, critically discuss the issues that have altered the procurement function in 2022 and review their impact on organisations.

1.2 You have been appointed as the lead procurement consultant at Bain and Company and your first assignment involves compiling a report addressed to procurement executives with recommendations on strategies that need to be implemented in responding to the issues highlighted in question 1.1 (above). Highlight in detail the main contents of your report.

QUESTION 2

"In the next year, a balanced perspective on metricsones that look at operational agility and supply base resiliency, then cost savingswill distinguish the procurement leaders from the laggards." Considering the statement provided, examine how the procurement function can contribute to increasing profits for an organisation

QUESTION 3

Organisations should invest time with a cross-functional team to catalogue the full scope of risks they face, building a risk-management framework that determines which metrics are appropriate for measuring risks, "what good looks like" for each metric, and how to rigorously track and monitor these metrics. From a procurement context, examine the different risks that the procurement function is exposed to and suggest measures on how these can be managed.

QUESTION 4

"Ethics originates from philosophy and refers to common principles associated with appropriate and inappropriate actions, moral duty and behaviour. In a business context, ethics refers to the use of recognised social principles that involve justice and fairness throughout the business relationship and being ethical means following a behaviour perceived as fair by the business community and wider society. You have been given the opportunity to assist the divisional head of Transnet in putting together an ethical code of conduct that will be used by the procurement function. Critically discuss the issues that you will address in the document. QUESTION 5

Unilever is a multinational fast consumer moving goods company with headquarters in London. Its products are inclusive of food, condiments, ice cream, cleaning agents, beauty products and personal care amongst many others. It is one of the largest producers of soap in the world. Examine the value of investing in procurement research for manufacturers such as Unilever.